R E P O R T - Congress.gov...The SBA size standards are important because they establish eli-gibility for a variety of small business assistance programs, includ-ing a panoply of government

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115TH CONGRESS REPORT " ! HOUSE OF REPRESENTATIVES 2d Session 115–939

SMALL BUSINESS RUNWAY EXTENSION ACT OF 2018

SEPTEMBER 12, 2018.—Committed to the Committee of the Whole House on the State of the Union and ordered to be printed

Mr. CHABOT, from the Committee on Small Business, submitted the following

R E P O R T

[To accompany H.R. 6330]

The Committee on Small Business, to whom was referred the bill (H.R. 6330) to amend the Small Business Act to modify the method for prescribing size standards for business concerns, having consid-ered the same, report favorably thereon without amendment and recommend that the bill do pass.

CONTENTS

Page I. Purpose and Bill Summary ........................................................................ 1

II. Need for Legislation .................................................................................... 2 III. Hearings ....................................................................................................... 7 IV. Committee Consideration ........................................................................... 8 V. Committee Votes ......................................................................................... 8

VI. Section-by-Section of H.R. 6330 ................................................................. 10 VII. Congressional Budget Office Cost Estimate ............................................. 10

VIII. Unfunded Mandates .................................................................................... 10 IX. New Budget Authority, Entitlement Authority, and Tax Expenditures 10 X. Oversight Findings ...................................................................................... 10

XI. Statement of Constitutional Authority ...................................................... 10 XII. Congressional Accountability Act .............................................................. 10

XIII. Federal Advisory Committee Act Statement ............................................ 11 XIV. Statement of No Earmarks ........................................................................ 11 XV. Statement of Duplication of Federal Programs ........................................ 11

XVI. Disclosure of Directed Rule Makings ........................................................ 11 XVII. Performance Goals and Objectives ............................................................ 11

XVIII. Changes in Existing Law, Made by the Bill, As Reported ...................... 11

I. PURPOSE AND BILL SUMMARY

The purpose of H.R. 6330, the ‘‘Small Business Runway Exten-sion Act of 2018,’’ is to help advanced-small contractors successfully navigate the middle market as they reach the upper limits of their small size standard.

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1 Furthermore, 15 U.S.C. δ 632(a)(2)(A) states that the Small Business Administration (SBA) is authorized to ‘‘specify detailed definitions or standards by which a business concern may be determined to be small for purposes of this Act or any other Act’’.

2 Current SBA size standards use gross revenue as a measure of dollar volume. Nothing in the Act requires reliance on dollar volume and other measures could be used.

3 The net worth standard is used, for among other purposes, to determine eligibility for invest-ments made by small business investment companies, loans made pursuant to Title V of the Small Business Investment Act of 1958, and for participation in the program established by § 8(a) of the Small Business Act.

4 The federal government spent $3.98 trillion in fiscal year 2017. USASPENDING.GOV, https:// www.usaspending.gov/#/.

5 The report states that federal agencies procured approximately $438 billion in products and services in fiscal year 2015. GAO, CONTRACTING DATA ANALYSIS: ASSESSMENT OF GOVERNMENT- WIDE TRENDS 5 (GAO-17-244SP) (2017).

H.R. 6330 lengthens the time in which the Small Business Ad-ministration (SBA) measures size through revenue, from the aver-age of the past 3 years to the average of the past 5 years. This modest modification of SBA’s size formula is designed to reduce the impact of rapid-growth years which result in spikes in revenue that may prematurely eject a small business out of their small size standard. This legislation will allow small businesses at every level more time to grow and develop their competitiveness and infra-structure, before entering the open marketplace. The bill will also protect federal investment in SBA’s small business programs by promoting greater chances of success in the middle market for newly-graduated firms, resulting in enhanced competition against large prime contractors.

II. BACKGROUND AND NEED FOR LEGISLATION

H.R. 6330 was introduced by Rep. Steve Knight (R–CA) and Rep. Yvette Clarke (D–NY) on July 11, 2018. Background on each of these provisions will be provided along with an explanation of the need for legislation.

A. DEFINING A SMALL BUSINESS—WHY IS THIS IMPORTANT?

Key to understanding the mid-size issue is to first understand the definition of a small business and the relevance of this defini-tion to federal procurement. Section 3(a)(1) of the Small Business Act, 15 U.S.C. 632(a)(1), provides, in pertinent part: ‘‘[a] small busi-ness concern . . . shall be deemed to be one that is independently owned and operated and which is not dominant in its field of oper-ation.’’ 1 To calculate the size of a small business, the SBA is au-thorized to consider number of employees, dollar volume of busi-ness,2 net worth,3 net income, other factors, or any combination of those factors. In sum, Congress has granted the Administrator sub-stantial discretion in calculating the size of a small business, pro-vided that the business is independently owned and operated and not dominant in its field.

The SBA size standards are important because they establish eli-gibility for a variety of small business assistance programs, includ-ing a panoply of government contracting programs designed to as-sist small businesses in obtaining federal government contracts. The federal government spends trillions of dollars per year,4 which includes hundreds of billions of dollars spent on products and serv-ices.5 The volume of dollars involved in federal contracting means that every firm is looking for a competitive advantage, and the small business contracting programs are one way to obtain that ad-


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6 15 U.S.C. § 631(a), 644(a). 7 NAICS code 541519, ‘‘Other Computer Related Services’’ is an often used industry code for

IT services. SMALL BUS. ADMIN., https://www.sba.gov/sites/default/files/files/Size—Standards— Table.pdf.

8 WASHINGTON TECH., https://washingtontechnology.com/toplists/top-100-lists/2017.aspx. 9 Leaving the Nest: Challenges Facing Advanced Small Businesses: Roundtable Before the H.

Comm. on Small Bus., 115th Cong. (2018) (statement of multiple roundtable participants), on file with the Committee.

10 Tonya Saunders, The mid-tier paradox: too small to compete, too large to survive, BLOOMBERG GOV. (May 13, 2016), https://about.bgov.com/blog/the-mid-tier-paradox-too-small-to- compete-too-large-to-survive/.

11 Id. 12 Supra note 9.

vantage. In order to diversify the industrial base, create jobs, and increase competition, contracting preferences have been extended to small business participants in the 8(a) Business Development program, the HUBZone program, the Service Disabled Veteran- Owned Small Business program, and the Woman-Owned Small Business Program.6

B. THE ‘‘OTHER-THAN-SMALL’’ CONUNDRUM

The federal government recognizes two categories of businesses— ‘‘small’’ and ‘‘other-than small.’’ While the SBA defines what a ‘‘small’’ business is, there is no federal definition for ‘‘other-than- small.’’ Therefore, this category can encompass firms that barely exceed the SBA’s small business size standards up to the multi-bil-lion dollar household names. For example, the upper limit of the SBA’s small business size standard for information technology (IT) companies 7 is $27.5 million. An IT company that barely surpasses that amount, for example at $28 million, or even significantly sur-passing that amount at $200 million, are considered ‘‘other-than- small’’ and therefore required to compete against each other and the dominant IT contractors. Leidos and Lockheed Martin Corp. are among the largest IT government contractors and boast an av-erage of $6.8 billion in annual revenue each.8

This creates a dilemma for newly-graduated firms—they no longer qualify for small business contracts and no longer eligible for SBA assistance, yet must compete in the open market against these titans of industry. In many cases, firms caught in this cir-cumstance face difficult choices. They may choose to sell, often at a devalued rate than they had previously held as a small company due to the loss of that small size status.9 If these businesses are not acquired and subsumed into the supply chain of larger compa-nies, they may choose to modify their business model, focusing on subcontracting opportunities with other small or large companies.10 This path negates the firm’s ability to gain critical project manage-ment skills needed to continue growth.11 Finally, they may fail or deliberately choose to impede their own success so that they may remain small and eligible for small business set-aside contracts.12

C. CHALLENGES FACING MID-SIZE BUSINESSES

While there are businesses that have successfully maintained their mid-size status, many firms venturing into the middle market face a heavily uncertain future and many threats to success. The Committee on Small Business examined a number of these chal-


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13 SupraT1K note 9. 14 David J. Berteau, Challenges Facing Advanced Small Businesses, PROF. SERVICES COUNCIL

(Dec. 14, 2017), https://www.pscouncil.org/a/Content/2017/Challenges_Facing_Advanced_ Small_Businesses.aspx.

15 Id. 16 Supra note 10. 17 Id. 18 BLOOMBERG GOV., THE MID-TIER PARADOX: TOO SMALL TO COMPETE, TOO LARGE TO SUR-

VIVE? 4 (2016). 19 Id.

lenges during a roundtable held on November 14, 2018 13 which are discussed, in brief, in this memorandum.

a. Lack of empirical data examining the failure or success rate of small businesses exceeding their small size

Because there is no federally-recognized definition of ‘‘mid-size,’’ there is a lack of empirical data tracking the trajectory of small firms as they exceed their size standard.14 As such, potentially crit-ical economic indicators remain uncaptured, such as: the success or failure rate of small businesses that grow out of their small status, the number of jobs created by growing small firms, industries that promote or inhibit middle-market growth, and many other factors.

Ultimately, this lack of data limits Congressional insight into how effective SBA’s contracting programs are in meeting national economic policies geared towards encouraging small business growth and job creation.15 Certain metrics that may be helpful to track, specifically regarding evaluating the impact of SBA’s con-tracting programs, may include: the success rate of newly-grad-uated firms competing in the open market, firms that deliberately scale back down to the small size standard, firms that merge or be-come acquired, and other metrics.

b. Newly-graduated small businesses are less able to compete against dominate large companies

The ‘‘other-than-small’’ category includes firms that have just graduated out of their small business size by mere dollars, through the entire middle-market spectrum, to also include the large, bil-lion-dollar companies. These large companies have several competi-tive advantages over small and mid-size firms, making true com-petition illusory. For instance, large companies have vast past per-formance qualifications, strong brand-name recognition and agency ties, as well as a multitude of professional certifications, clear-ances, and greater financial resources.16 Small and mid-size busi-nesses cannot afford to maintain these resources, leaving them at a considerable disadvantage. These advantages by large firms can have a chilling effect, potentially freezing out emerging advanced- small companies.17 While larger mid-size firms have a stronger foothold in the middle market, they still have limited bid and pro-posal budgets and many do not have specialized teams dedicated to business development or communications and marketing.18 Large companies have a solid infrastructure and can afford teams of personnel dedicated to proposal development, graphic design, protests, pipeline development, legal teams, and other specializa-tions.19

Additionally, large businesses, which once competed primarily for large, high-dollar contracts, are now increasingly competing for contracts across the spectrum, including those contracts that are


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20 Mark Amtower, Be prepared: GWACS, IDIQs will grow in this age of uncertainty, WASH. TECHNOLOGY (Mar. 16, 2017), https://washingtontechnology.com/articles/2017/03/16/insights- amtower-gwac-idiq-advice.aspx.

21 15 USC § 637(d)(4) and (6). 22 Supra note 9. 23 The federal government has reported decreased spending yearly from fiscal year 2011 to fis-

cal year 2016. NATIONAL CONTRACT MANAGEMENT ASSOCIATION & DELTEK, ANNUAL REVIEW OF GOVERNMENT CONTRACTING 2016 7 (2017).

24 The Committee has a long history of oversight with respect to contract bundling and con-solidation, as well as the initiatives used to employ these strategies, e.g., FSSI and Category Management. Further explanation is outside of the scope of this report. Contracting and the In-dustrial Base II: Bundling, Goaling, and the Office of Hearings and Appeals: Hearing Before the Subcomm. on Contracting and Workforce of the H. Comm. on Small Bus., 114th Cong. (2015).

25 Id. 26 Supra note 20.

most suitable for mid-sized and advanced-small businesses.20 This puts additional pressure on mid-size firms, particularly those emer-gent, advanced-small businesses.

c. Going from small to other-than-small triggers certain require-ments

As contracts grow in scope and size, one large contract (i.e., a high-dollar value set-aside contract) won by a small company could catapult that firm out of its small size status. This growth out of the small size triggers certain requirements that other-than-small firms must comply with, that small firms are exempt from. For ex-ample, other-than-small firms must develop detailed subcontracting plans; 21 however, small businesses are exempt from this require-ment. Thus, a small firm that saw a spike in revenue due to win-ning a large contract may not have the infrastructure and business processes prepared and in place to take on a whole host of new re-quirements. This may result in small business struggling to stay viable in the open market and may be one of the contributing fac-tors to the constant shuffling between small/other-than-small sta-tus that is evident between the upper levels of the small size brack-et, and the lower levels of the mid-tier bracket.22

d. The federal procurement landscape creates inherent challenges to growth

Due to evolving federal procurement practices, small and mid- tier companies are facing a more uncertain climate. One of the challenges small and mid-size firms face is a shrinking federal market. As budgets have shrunk,23 the use of contract consolida-tion and bundling has risen—this is a procurement strategy that combines several separate, smaller contracts into one unnecessarily large and complex contract, increasing the size and scope of the contract.24 These contracts become prohibitive to small or mid-size businesses, and are suitable mostly for larger companies. This dis-advantages emergent, newly graduated firms and smaller mid-size firms from competing on these contracts which are now too complex to suit their internal capabilities. The Federal Strategic Sourcing Initiative (FSSI), Category Management, and other executive branch initiatives continue to promote bundling and consolida-tion.25

Additionally, large, government-wide contract vehicles and in-definite-delivery, indefinite-quantity contracts have experienced significant growth in utilization the past several years.26 Those small and mid-size businesses fortunate enough to have been


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27 Description of these MACs and IDIQs such as Alliant are beyond the scope of this memo-randum. BLOOMBERG GOV., THE MID-TIER PARADOX: 2018 COMPANY REPORT 6 (2018).

28 Id. at 6, 11. 29 SECTION 809 PANEL, REPORT OF THE ADVISORY PANEL ON STREAMLINING AND CODIFYING AC-

QUISITION REGULATIONS 171 (1 vol. 2018). 30 BLOOMBERG GOV., THE MID-TIER CHALLENGE 2 (2017).

awarded a spot on these highly-competitive, long-term contracts may still be locked out of key markets or forced to subcontract by large multiple-award contracts that require overly extensive past performance requirements, such as Alliant and OASIS.27 The in-creasing use of strict past performance quantification as an evalua-tion tool hinders small mid-tier companies from competing as prime vendors, essentially blocking them out of critical growth markets for years.28

Furthermore, due to budget constraints and other interagency pressures, contracting officers are increasingly expecting vendors to be able to do more with less, and in the face of uncertainty, the government tends to be risk-averse, preferring to contract with large, established contractors over small and mid-tier companies. Because of these and other changes in the procurement landscape, the diversity of contractors has drastically declined,29 further lim-iting the choices contracting officers have. In sum, the shrinking federal market, increased use of large, government-wide con-tracting vehicles, and increasing use of strict past performance qualifications on these contracting vehicles limits the government’s opportunity to realize a return on its investment in emergent small firms and mid-size businesses.

D. POTENTIAL LEGISLATION EXTENDING DEFINITION OF A SMALL BUSINESS: PROS AND CONS

The Committee engaged stakeholders in identifying potential leg-islation that may assist advanced-small businesses transitioning into the middle market. Proponents believe that the size standards the SBA sets for certain industries may fail to encompass many firms that are small according to statute, i.e., independently owned and not dominant in its field. Thus, the suggestion was raised to amend the Small Business Act to provide a longer time period for which a business may be qualified as small, arguing that this will improve the health of the industrial base, increase competition re-sulting in lower prices, and create and preserve jobs.

a. Industrial base Proponents argue that mid-size firms are failing, as small firms

that outgrow the size standards either go out of business or are ac-quired by large firms. An earlier study by Bloomberg Government, examining data from fiscal years 2012–16, predicted a dire outlook with weaker mid-size prospects, finding that ‘‘average annual prime contract revenue for this segment of the federal market has declined substantially . . . midsize contractors are losing market share year after year . . . pressures from both large and small companies have squeezed the mid-tier market share, and this trend doesn’t show signs of slowing down in the long-term future.’’ 30


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31 For example, the National Center for the Middle Market found that five years of middle- market data show that the middle market produces jobs 1.5 to 2 times faster than either big or small businesses, producing 3 out of 5 net new private-sector jobs. Michael Evans, Job Cre-ation in the New Political Economy: Small Companies, Not Big Companies, Create Jobs, FORBES (Feb. 8, 2017), https://www.forbes.com/sites/allbusiness/2017/02/08/job-creation-in-the-new-polit-ical-economy-small-companies-not-big-companies-create-jobs/#82a24949e6ec.

b. Competition and price Proponents further argue that an increase in mid-size business

presence in the market will increase competition against the larger competitors, thereby decreasing price. Given the trend towards in-creased use of larger, consolidated, multi-award contracts and the decline of small businesses willing to work with the federal govern-ment as described earlier in this memorandum, there is a concern that contracts will become increasingly available for the largest contractors and less so for smaller contractors. A strong middle market consisting of emergent, newly-graduated firms up to larger mid-size companies might increase competition against the biggest federal contractors and could indeed bring down prices.

c. Creation/preservation of jobs When mid-size businesses are acquired by large firms, the large

firm normally sheds the administrative side of the businesses—the human resources, accounting, marketing, legal, and other functions which are often duplicated at the acquiring company’s office. Thus, these jobs are lost. Proponents argue that maintaining and growing these businesses would preserve these jobs. Further, they argue that if the mid-size business continues to grow, it will also continue to add jobs, pointing out that these firms are credited with high job creation.31

d. Inhibiting growth of small businesses Proponents of legislation extending the period of time a business

can be considered small argue that a longer transitional period would benefit small firms who experience sudden, rapid growth in revenue, typically by winning a large contract or task order. A change in the calculation of size would help these firms sustain revenue levels under the small size threshold, allowing them the ability to develop their business plan and infrastructure to transi-tion to mid-size more successfully, because of the increased lead- time.

III. HEARINGS

In the 115th Congress, the Committee held one hearing exam-ining the issues covered in H.R. 6330. On April 26, 2018, the Com-mittee on Small Business Subcommittee on Contracting and Work-force met for a hearing titled ‘‘No Man’s Land: Middle-Market Challenges for Small Business Graduates.’’ This hearing examined the challenges to growth and success for businesses as they ap-proach the upper limits of their small size standard. Witnesses in-cluded a subject matter expert representing the Montgomery Coun-ty Chamber of Commerce, two advanced-small business owners, and a representative of the Federal Procurement Information Tech-nology Alliance for Public Sector (ITAPS) Information Technology Industry Council.


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IV. COMMITTEE CONSIDERATION

The Committee on Small Business met in open session, with a quorum being present, on July 18, 2018 and ordered H.R. 6330 fa-vorably reported to the House. During the markup, no amendments were offered.

V. COMMITTEE VOTES

Clause 3(b) of rule XIII of the Rules of the House of Representa-tives requires the Committee to list the recorded votes on the mo-tion to report legislation and amendments thereto. The Committee voted by voice vote to favorably report H.R. 6330 to the House at 11:31 am.


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VI. SECTION-BY-SECTION ANALYSIS OF H.R. 6330

Section 1. Short title This section designates the bill as the ‘‘Small Business Runway

Extension Act of 2018.’’

Section 2. Modification to method for prescribing size standards for business concerns

This section amends Section 15 of the Small Business Act by changing the size determination of a small business concern based on the annual average gross receipts of the small business concern over the past 3 years, to the past 5 years.

VII. CONGRESSIONAL BUDGET OFFICE COST ESTIMATE

At the time H.R. 6330 was reported to the House, the Congres-sional Budget Office had not provided a cost estimate.

VIII. UNFUNDED MANDATES

H.R. 6330 contains no intergovernmental or private-sector man-dates as defined in the Unfunded Mandates Reform Act, Public Law No. 104–4, and would impose no costs on state, local, or tribal governments.

IX. NEW BUDGET AUTHORITY, ENTITLEMENT AUTHORITY, AND TAX EXPENDITURES

In compliance with clause 3(c)(2) of rule XIII of the Rules of the House, the Committee provides the following opinion and estimate with respect to new budget authority, entitlement authority, and tax expenditures. While the Committee has not received an esti-mate of new budget authority contained in the cost estimate pre-pared by the Director of the Congressional Budget Office pursuant to 402 of the Congressional Budget Act of 1974, the Committee does not believe that there will be any additional costs attributable to this legislation. H.R. 6330 does not direct new spending, but in-stead reallocates funding independently authorized and appro-priated.

X. OVERSIGHT FINDINGS

In accordance with clause 2(b)(1) of rule X of the Rules of the House, the oversight findings and recommendations of the Com-mittee on Small Business with respect to the subject matter con-tained in H.R. 6330 are incorporated into the descriptive portions of this report.

XI. STATEMENT OF CONSTITUTIONAL AUTHORITY

Pursuant to clause 7 of rule XII of the Rules of the House, the Committee finds that the authority for this legislation in Art. I, 8, cl.1.

XII. CONGRESSIONAL ACCOUNTABILITY ACT

H.R. 6330 does not relate to the terms and conditions of employ-ment or access to public services or accommodations within the meaning of 102(b)(3) of Public Law No. 104–1.


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XIII. FEDERAL ADVISORY COMMITTEE ACT STATEMENT

H.R. 6330 does not establish or authorize the establishment of any new advisory committees as that term is defined in the Federal Advisory Committee Act, 5 U.S.C. App.2.

XIV. STATEMENT OF NO EARMARKS

Pursuant to clause 9 of rule XXI, H.R. 6330 does not contain any congressional earmarks, limited tax benefits, or limited tariff bene-fits as defined in subsections (d), (e), or (f) of clause 9 of Rule XXI of the Rules of the House.

XV. STATEMENT OF DUPLICATION OF FEDERAL PROGRAMS

Pursuant to clause 3 of the rule XIII of the Rules of the House, no provision of H.R. 6330 establishes or reauthorizes a program of the federal government known to be duplicative of another federal program, a program that was included in any report from the United States Government Accountability Office pursuant to 21 of Pub. L. No. 111–139, or a program related to a program identified in the most recent catalog of federal domestic assistance.

XVI. DISCLOSURE OF DIRECTED RULEMAKINGS

Pursuant to clause 3 of the rule XIII of the Rules of the House, H.R. 6330 does not direct any rulemaking.

XVII. PERFORMANCE GOALS AND OBJECTIVES

Pursuant to clause 3(c)(4) of rule XIII of the Rules of the House, the Committee establishes the following performance-related goals and objectives for this legislation:

H.R. 6330 extends the time in which a business can be con-sidered small as measured by SBA’s size standard by modi-fying the calculation used to determine size. The objective is to allow the small firm additional time to build its competitive-ness in order to succeed once it exceeds its small size and must enter the open marketplace, competing against much larger firms.

XVIII. CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause (E) of rule XIII of the rules of the House, changes in existing law made by the bill, as reported, are shown as follows: existing law proposed to be omitted is enclosed in black brackets, new matter is printed in italic, and existing law in which no change is proposed is shown in roman:

CHANGES IN EXISTING LAW MADE BY THE BILL, AS REPORTED

In compliance with clause 3(e) of rule XIII of the Rules of the House of Representatives, changes in existing law made by the bill, as reported, are shown as follows (existing law proposed to be omit-ted is enclosed in black brackets, new matter is printed in italic, and existing law in which no change is proposed is shown in roman):


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SMALL BUSINESS ACT

* * * * * * * SEC. 3. DEFINITIONS.

(a) SMALL BUSINESS CONCERNS.— (1) IN GENERAL.—For the purposes of this Act, a small-busi-

ness concern, including but not limited to enterprises that are engaged in the business of production of food and fiber, ranch-ing and raising of livestock, aquaculture, and all other farming and agricultural related industries, shall be deemed to be one which is independently owned and operated and which is not dominant in its field of operation.

(2) ESTABLISHMENT OF SIZE STANDARDS.— (A) IN GENERAL.—In addition to the criteria specified in

paragraph (1), the Administrator may specify detailed defi-nitions or standards by which a business concern may be determined to be a small business concern for the purposes of this Act or any other Act.

(B) ADDITIONAL CRITERIA.—The standards described in paragraph (1) may utilize number of employees, dollar vol-ume of business, net worth, net income, a combination thereof, or other appropriate factors.

(C) REQUIREMENTS.—Unless specifically authorized by statute, no Federal department or agency may prescribe a size standard for categorizing a business concern as a small business concern, unless such proposed size stand-ard—

(i) is proposed after an opportunity for public notice and comment;

(ii) provides for determining— (I) the size of a manufacturing concern as meas-

ured by the manufacturing concern’s average em-ployment based upon employment during each of the manufacturing concern’s pay periods for the preceding 12 months;

(II) the size of a business concern providing services on the basis of the annual average gross receipts of the business concern over a period of not less than ø3 years¿ 5 years;

(III) the size of other business concerns on the basis of data over a period of not less than 3 years; or

(IV) other appropriate factors; and (iii) is approved by the Administrator.

(3) VARIATION BY INDUSTRY AND CONSIDERATION OF OTHER FACTORS.—When establishing or approving any size standard pursuant to paragraph (2), the Administrator shall ensure that the size standard varies from industry to industry to the extent necessary to reflect the differing characteristics of the various industries and consider other factors deemed to be relevant by the Administrator.

(4) EXCLUSION OF CERTAIN SECURITY EXPENSES FROM CONSID-ERATION FOR PURPOSE OF SMALL BUSINESS SIZE STANDARDS.—

(A) DETERMINATION REQUIRED.—Not later than 30 days after the date of enactment of this paragraph, the Admin-


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istrator shall review the application of size standards es-tablished pursuant to paragraph (2) to small business con-cerns that are performing contracts in qualified areas and determine whether it would be fair and appropriate to ex-clude from consideration in the average annual gross re-ceipts of such small business concerns any payments made to such small business concerns by Federal agencies to re-imburse such small business concerns for the cost of sub-contracts entered for the sole purpose of providing security services in a qualified area.

(B) ACTION REQUIRED.—Not later than 60 days after the date of enactment of this paragraph, the Administrator shall either—

(i) initiate an adjustment to the size standards, as described in subparagraph (A), if the Administrator determines that such an adjustment would be fair and appropriate; or

(ii) provide a report to the Committee on Small Business and Entrepreneurship of the Senate and the Committee on Small Business of the House of Rep-resentatives explaining in detail the basis for the de-termination by the Administrator that such an adjust-ment would not be fair and appropriate.

(C) QUALIFIED AREAS.—In this paragraph, the term ‘‘qualified area’’ means—

(i) Iraq, (ii) Afghanistan, and (iii) any foreign country which included a combat

zone, as that term is defined in section 112(c)(2) of the Internal Revenue Code of 1986, at the time of perform-ance of the relevant Federal contract or subcontract.

(5) ALTERNATIVE SIZE STANDARD.— (A) IN GENERAL.—The Administrator shall establish an

alternative size standard for applicants for business loans under section 7(a) and applicants for development com-pany loans under title V of the Small Business Investment Act of 1958 (15 U.S.C. 695 et seq.), that uses maximum tangible net worth and average net income as an alter-native to the use of industry standards.

(B) INTERIM RULE.—Until the date on which the alter-native size standard established under subparagraph (A) is in effect, an applicant for a business loan under section 7(a) or an applicant for a development company loan under title V of the Small Business Investment Act of 1958 may be eligible for such a loan if—

(i) the maximum tangible net worth of the applicant is not more than $15,000,000; and

(ii) the average net income after Federal income taxes (excluding any carry-over losses) of the applicant for the 2 full fiscal years before the date of the appli-cation is not more than $5,000,000.

(6) PROPOSED RULEMAKING.—In conducting rulemaking to re-vise, modify or establish size standards pursuant to this sec-tion, the Administrator shall consider, and address, and make


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publicly available as part of the notice of proposed rulemaking and notice of final rule each of the following:

(A) a detailed description of the industry for which the new size standard is proposed;

(B) an analysis of the competitive environment for that industry;

(C) the approach the Administrator used to develop the proposed standard including the source of all data used to develop the proposed rule making; and

(D) the anticipated effect of the proposed rulemaking on the industry, including the number of concerns not cur-rently considered small that would be considered small under the proposed rule making and the number of con-cerns currently considered small that would be deemed other than small under the proposed rulemaking.

(7) COMMON SIZE STANDARDS.—In carrying out this sub-section, the Administrator may establish or approve a single size standard for a grouping of 4-digit North American Indus-try Classification System codes only if the Administrator makes publicly available, not later than the date on which such size standard is established or approved, a justification demonstrating that such size standard is appropriate for each individual industry classification included in the grouping.

(8) NUMBER OF SIZE STANDARDS.—The Administrator shall not limit the number of size standards established pursuant to paragraph (2), and shall assign the appropriate size standard to each North American Industry Classification System Code.

(9) PETITIONS FOR RECONSIDERATION OF SIZE STANDARDS.— (A) IN GENERAL.—A person may file a petition for recon-

sideration with the Office of Hearings and Appeals (as es-tablished under section 5(i)) of a size standard revised, modified, or established by the Administrator pursuant to this subsection.

(B) TIME LIMIT.—A person filing a petition for reconsid-eration described in subparagraph (A) shall file such peti-tion not later than 30 days after the publication in the Federal Register of the notice of final rule to revise, mod-ify, or establish size standards described in paragraph (6).

(C) PROCESS FOR AGENCY REVIEW.—The Office of Hear-ings and Appeals shall use the same process it uses to de-cide challenges to the size of a small business concern to decide a petition for review pursuant to this paragraph.

(D) JUDICIAL REVIEW.—The publication of a final rule in the Federal Register described in subparagraph (B) shall be considered final agency action for purposes of seeking judicial review. Filing a petition for reconsideration under subparagraph (A) shall not be a condition precedent to ju-dicial review of any such size standard.

(E) RULES OR GUIDANCE.—The Office of Hearings and Appeals shall begin accepting petitions for reconsideration described in subparagraph (A) after the date on which the Administration issues a rule or other guidance imple-menting this paragraph. Notwithstanding the provisions of subparagraph (B), petitions for reconsideration of size standards revised, modified, or established in a Federal


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Register final rule published between November 25, 2015, and the effective date of such rule or other guidance shall be considered timely if filed within 30 days of such effec-tive date.

(b) For purposes of this Act, any reference to an agency or de-partment of the United States, and the term ‘‘Federal agency,’’ shall have the meaning given the term ‘‘agency’’ by section 551(1) of title 5, United States Code, but does not include the United States Postal Service or the General Accounting Office.

(c)(1) For purposes of this Act, a qualified employee trust shall be eligible for any loan guarantee under section 7(a) with respect to a small business concern on the same basis as if such trust were the same legal entity as such concern.

(2) For purposes of this Act, the term ‘‘qualified employee trust’’ means, with respect to a small business concern, a trust—

(A) which forms part of an employee stock ownership plan (as defined in section 4975(e)(7) of the Internal Revenue Code of 1954)—

(i) which is maintained by such concern, and (ii) which provides that each participant in the plan is

entitle to direct the plan as to the manner in which voting rights under qualifying employer securities (as defined in section 4975(e)(8) of such Code) which are allocated to the account of such participant are to be exercised with respect to a corporate matter which (by law or charter) must be decided by a majority vote of outstanding common shares voted; and

(B) in the case of any loan guarantee under section 7(a), the trustee of which enters into an agreement with the Adminis-trator of which enters into an agreement with the Adminis-trator which is binding on the trust and no such small busi-ness concern and which provides that—

(i) the loan guaranteed under section 7(a) shall be used solely for the purchase of qualifying employer securities of such concern.

(ii) all funds acquired by the concern in such purchase shall be used by such concern solely for the purposes for which such loan was guaranteed,

(iii) such concern will provide such funds as may be nec-essary for the timely repayment of such loan, and the property of such concern shall be available as security for repayment of such loan, and

(iv) all qualifying employer securities acquired by such trust in such purchase shall be allocated to the accounts of participants in such plan who are entitled to share in such allocation, and each participant has a nonforfeitable right, not later than the date such loan is repaid, to all such qualifying employer securities which are so allocated to the participant’s account.

(3) Under regulations which may be prescribed by the Adminis-trator, a trust may be treated as a qualified employee trust with respect to a small business concern if—

(A) the trust is maintained by an employee organization which represents at least 51 percent of the employee of such concern, and


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(B) such concern maintains a plan— (i) which is an employee benefit plan which is designed

to invest primarily in qualifying employer securities (as defined in section 4975(e)(8) of the Internal Revenue Code of 1954).

(ii) which provides that each participant in the plan is entitled to direct the plan as to the manner in which vot-ing rights under qualifying employer securities which are allocated to the account of such participant are to be exer-cised with respect to a corporate matter which (by law or charter) must be decided by a majority vote of the out-standing common shares voted,

(iii) which provides that each participant who is entitled to distribution from the plan has a right, in the case of qualifying employer securities which are not readily tradable on an established market, to require that the con-cern repurchase such securities under a fair valuation for-mula, and

(iv) which meets such other requirements (similar to re-quirements applicable to employee ownership plans as de-fined in section 4975(e)(7) of the Internal Revenue Code of 1954) as the Administrator may prescribe, and

(C) in the case of a loan guarantee under section 7(a), such organization enters into an agreement with the Administration which is described in paragraph (2)(B).

(d) For purposes of section 7 of this Act, the term ‘‘qualified In-dian tribe’’ means an Indian tribe as defined in section 4(a) of the Indian Self-Determination and Education Assistance Act, which owns and controls 100 per centum of a small business concern.

(e) For purposes of section 7 of this Act, the term ‘‘public or pri-vate organization for the handicapped’’ means one—

(1) which is organized under the laws of the United States or of any State, operated in the interest of handicapped indi-viduals, the net income of which does not insure in whole or in part to the benefit of any shareholder or other individual;

(2) which complies with any applicable occupational health and safety standard prescribed by the Secretary of Labor; and

(3) which, in the production of commodities and in the provi-sion of services during any fiscal year in which it received fi-nancial assistance under this subsection, employs handicapped individuals for not less than 75 per centum of the man-hours required for the production or provision of the commodities or services.

(f) For purposes of section 7 of this Act, the term ‘‘handicapped individual’’ means an individual—

(1) who has a physical, mental, or emotional impairment, de-fect, ailment, disease, or disability of a permanent nature which in any way limits the selection of any type of employ-ment for which the person would otherwise be qualified or qualifiable; or

(2) who is a service-disabled veteran. (g) For purposes of section 7 of this Act, the term ‘‘energy meas-

ures’’ includes— (1) solar thermal energy equipment which is either of the ac-

tive type based upon mechanically forced energy transfer or of


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the passive type based on convective, conductive, or radiant en-ergy transfer or some combination equipment;

(2) photovoltaic cells and related equipment; (3) a product or service the primary purpose of which is con-

servation of energy through devices or techniques which in-crease the energy through devices or techniques which increase the energy efficiency of existing equipment, methods of oper-ation, or systems which use fossil fuels, and which is on the Energy Conservation Measures list of the Secretary of Energy or which the Administrator determines to be consistent with the intent of this subsection;

(4) equipment the primary purpose of which is production of energy from wood, biological waste, grain, or other biomass source of energy;

(5) equipment the primary purpose of which is industrial co-generation of energy, district heating, or production of energy from industrial waste;

(6) hydroelectric power equipment; (7) wind energy conversion equipment; and (8) engineering, architectural, consulting, or other profes-

sional services which are necessary or appropriate to aid citi-zens in using any of the measures described in paragraph (1) through (7).

(h) The term ‘‘credit elsewhere’’ means— (1) for the purposes of this Act (except as used in section

7(b)), the availability of credit on reasonable terms and condi-tions to the individual loan applicant from non-Federal, non- State, or non-local government sources, considering factors as-sociated with conventional lending practices, including—

(A) the business industry in which the loan applicant op-erates;

(B) whether the loan applicant is an enterprise that has been in operation for a period of not more than 2 years;

(C) the adequacy of the collateral available to secure the requested loan;

(D) the loan term necessary to reasonably assure the ability of the loan applicant to repay the debt from the ac-tual or projected cash flow of the business; and

(E) any other factor relating to the particular credit ap-plication, as documented in detail by the lender, that can-not be overcome except through obtaining a Federal loan guarantee under prudent lending standards; and

(2) for the purposes of section 7(b), the availability of credit on reasonable terms and conditions from non-Federal sources taking into consideration the prevailing rates and terms in the community in or near where the applicant business concern transacts business, or the applicant homeowner resides, for similar purposes and periods of time.

(i) For purposes of section 7 of this Act, the term ‘‘homeowners’’ includes owners and lessees of residential property and also in-cludes personal property.

(j) For the purposes of this Act, the term ‘‘small agricultural co-operative’’ means an association (corporate or otherwise) acting pursuant to the provisions of the Agricultural Marketing Act (12 U.S.C. 1141j), whose size does not exceed the size standard estab-


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lished by the Administration for other similar agricultural small business concerns. In determining such size, the Administration shall regard the association as a business concern and shall not in-clude the income or employees of any member shareholder of such cooperative.

(k)(1) For the purposes of this Act, the term ‘‘disaster’’ means a sudden event which causes severe damage including, but not lim-ited to, floods, hurricanes, tornadoes, earthquakes, fires, explosions, volcanoes, windstorms, landslides or mudslides, tidal waves, com-mercial fishery failures or fishery resource disasters (as determined by the Secretary of Commerce under section 308(b) of the Inter-jurisdictional Fisheries Act of 1986), ocean conditions resulting in the closure of customary fishing waters, riots, civil disorders or other catastrophes, except it does not include economic dislocations.

(2) For purposes of section 7(b)(2), the term ‘‘disaster’’ includes— (A) drought; (B) below average water levels in the Great Lakes, or on any

body of water in the United States that supports commerce by small business concerns; and

(C) ice storms and blizzards. (l) For purposes of this Act—

(1) the term ‘‘computer crime’’ means’’— (A) any crime committed against a small business con-

cern by means of the use of a computer; and (B) any crime involving the illegal use of, or tampering

with, a computer owned or utilized by a small business concern.

(m) DEFINITIONS RELATING TO CONTRACTING.—In this Act: (1) PRIME CONTRACT.—The term ‘‘prime contract’’ has the

meaning given such term in section 8701(4) of title 41, United States Code.

(2) PRIME CONTRACTOR.—The term ‘‘prime contractor’’ has the meaning given such term in section 8701(5) of title 41, United States Code.

(3) SIMPLIFIED ACQUISITION THRESHOLD.—The term ‘‘sim-plified acquisition threshold’’ has the meaning given such term in section 134 of title 41, United States Code.

(4) MICRO-PURCHASE THRESHOLD.—The term ‘‘micro-purchase threshold’’ has the meaning given such term in section 1902 of title 41, United States Code.

(5) TOTAL PURCHASES AND CONTRACTS FOR PROPERTY AND SERVICES.—The term ‘‘total purchases and contracts for prop-erty and services’’ shall mean total number and total dollar amount of contracts and orders for property and services.

(n) For the purposes of this Act, a small business concern is a small business concern owned and controlled by women if—

(1) at least 51 percent of small business concern is owned by one or more women or, in the case of any publicly owned busi-ness, at least 51 percent of the stock of which is owned by one or more women; and

(2) the management and daily business operations of the business are controlled by one or more women.

(o) DEFINITIONS OF BUNDLING OF CONTRACT REQUIREMENTS AND RELATED TERMS.—In this Act:


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(1) BUNDLED CONTRACT.—The term ‘‘bundled contract’’ means a contract that is entered into to meet requirements that are consolidated in a bundling of contract requirements.

(2) BUNDLING OF CONTRACT REQUIREMENTS.—The term ‘‘bun-dling of contract requirements’’ means consolidating 2 or more procurement requirements for goods or services previously pro-vided or performed under separate smaller contracts into a so-licitation of offers for a single contract that is likely to be un-suitable for award to a small-business concern due to—

(A) the diversity, size, or specialized nature of the ele-ments of the performance specified;

(B) the aggregate dollar value of the anticipated award; (C) the geographical dispersion of the contract perform-

ance sites; or (D) any combination of the factors described in subpara-

graphs (A), (B), and (C). (3) SEPARATE SMALLER CONTRACT.—The term ‘‘separate

smaller contract’’, with respect to a bundling of contract re-quirements, means a contract that has been performed by 1 or more small business concerns or was suitable for award to 1 or more small business concerns.

(p) DEFINITIONS RELATING TO HUBZONES.—In this Act: (1) HISTORICALLY UNDERUTILIZED BUSINESS ZONE.—The term

‘‘historically underutilized business zone’’ means any area lo-cated within 1 or more—

(A) qualified census tracts; (B) qualified nonmetropolitan counties; (C) lands within the external boundaries of an Indian

reservation; (D) redesignated areas; (E) base closure areas; or (F) qualified disaster areas.

(2) HUBZONE.—The term ‘‘HUBZone’’ means a historically underutilized business zone.

(3) HUBZONE SMALL BUSINESS CONCERN.—The term ‘‘HUBZone small business concern’’ means—

(A) a small business concern that is at least 51 percent owned and controlled by United States citizens;

(B) a small business concern that is— (i) an Alaska Native Corporation owned and con-

trolled by Natives (as determined pursuant to section 29(e)(1) of the Alaska Native Claims Settlement Act (43 U.S.C. 1626(e)(1))); or

(ii) a direct or indirect subsidiary corporation, joint venture, or partnership of an Alaska Native Corpora-tion qualifying pursuant to section 29(e)(1) of the Alas-ka Native Claims Settlement Act (43 U.S.C. 1626(e)(1)), if that subsidiary, joint venture, or part-nership is owned and controlled by Natives (as deter-mined pursuant to section 29(e)(2)) of the Alaska Na-tive Claims Settlement Act (43 U.S.C. 1626(e)(2)));

(C) a small business concern— (i) that is wholly owned by one or more Indian tribal

governments, or by a corporation that is wholly owned by one or more Indian tribal governments; or


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(ii) that is owned in part by one or more Indian trib-al governments, or by a corporation that is wholly owned by one or more Indian tribal governments, if all other owners are either United States citizens or small business concerns;

(D) a small business concern— (i) that is wholly owned by one or more Native Ha-

waiian Organizations (as defined in section 8(a)(15)), or by a corporation that is wholly owned by one or more Native Hawaiian Organizations; or

(ii) that is owned in part by one or more Native Ha-waiian Organizations, or by a corporation that is whol-ly owned by one or more Native Hawaiian Organiza-tions, if all other owners are either United States citi-zens or small business concerns;

(E) a small business concern that is— (i) wholly owned by a community development cor-

poration that has received financial assistance under part 1 of subchapter A of the Community Economic Development Act of 1981 (42 U.S.C. 9805 et seq.); or

(ii) owned in part by one or more community devel-opment corporations, if all other owners are either United States citizens or small business concerns; or

(F) a small business concern that is— (i) a small agricultural cooperative organized or in-

corporated in the United States; (ii) wholly owned by 1 or more small agricultural co-

operatives organized or incorporated in the United States; or

(iii) owned in part by 1 or more small agricultural cooperatives organized or incorporated in the United States, if all owners are small business concerns or United States citizens.

(4) QUALIFIED AREAS.— (A) QUALIFIED CENSUS TRACT.—

(i) IN GENERAL.—The term ‘‘qualified census tract’’ has the meaning given that term in section 42(d)(5)(B)(ii) of the Internal Revenue Code of 1986.

(ii) EXCEPTION.—For any metropolitan statistical area in the Commonwealth of Puerto Rico, the term ‘‘qualified census tract’’ has the meaning given that term in section 42(d)(5)(B)(ii) of the Internal Revenue Code of 1986 as applied without regard to subclause (II) of such section, except that this clause shall only apply—

(I) 10 years after the date that the Adminis-trator implements this clause, or

(II) the date on which the Financial Oversight and Management Board for the Commonwealth of Puerto Rico created by the Puerto Rico Oversight, Management, and Economic Stability Act ceases to exist,

whichever event occurs first. (B) QUALIFIED NONMETROPOLITAN COUNTY.—The term

‘‘qualified nonmetropolitan county’’ means any county—


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(i) that was not located in a metropolitan statistical area (as defined in section 143(k)(2)(B) of the Internal Revenue Code of 1986) at the time of the most recent census taken for purposes of selecting qualified census tracts under section 42(d)(5)(C)(ii) of the Internal Rev-enue Code of 1986; and

(ii) in which— (I) the median household income is less than 80

percent of the nonmetropolitan State median household income, based on the most recent data available from the Bureau of the Census of the Department of Commerce;

(II) the unemployment rate is not less than 140 percent of the average unemployment rate for the United States or for the State in which such coun-ty is located, whichever is less, based on the most recent data available from the Secretary of Labor; or

(III) there is located a difficult development area, as designated by the Secretary of Housing and Urban Development in accordance with sec-tion 42(d)(5)(C)(iii) of the Internal Revenue Code of 1986, within Alaska, Hawaii, or any territory or possession of the United States outside the 48 contiguous States.

(C) REDESIGNATED AREA.—The term ‘‘redesignated area’’ means any census tract that ceases to be qualified under subparagraph (A) and any nonmetropolitan county that ceases to be qualified under subparagraph (B), except that a census tract or a nonmetropolitan county may be a ‘‘re-designated area’’ only until the later of—

(i) the date on which the Census Bureau publicly re-leases the first results from the 2010 decennial census; or

(ii) 3 years after the date on which the census tract or nonmetropolitan county ceased to be so qualified.

(D) BASE CLOSURE AREA.— (i) IN GENERAL.—Subject to clause (ii), the term

‘‘base closure area’’ means— (I) lands within the external boundaries of a

military installation that were closed through a privatization process under the authority of—

(aa) the Defense Base Closure and Realign-ment Act of 1990 (part A of title XXIX of divi-sion B of Public Law 101–510; 10 U.S.C. 2687 note);

(bb) title II of the Defense Authorization Amendments and Base Closure and Realign-ment Act (Public Law 100–526; 10 U.S.C. 2687 note);

(cc) section 2687 of title 10, United States Code; or

(dd) any other provision of law authorizing or directing the Secretary of Defense or the Secretary of a military department to dispose


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of real property at the military installation for purposes relating to base closures of redevel-opment, while retaining the authority to enter into a leaseback of all or a portion of the prop-erty for military use;

(II) the census tract or nonmetropolitan county in which the lands described in subclause (I) are wholly contained;

(III) a census tract or nonmetropolitan county the boundaries of which intersect the area de-scribed in subclause (I); and

(IV) a census tract or nonmetropolitan county the boundaries of which are contiguous to the area described in subclause (II) or subclause (III).

(ii) LIMITATION.—A base closure area shall be treat-ed as a HUBZone—

(I) with respect to a census tract or nonmetro-politan county described in clause (i), for a period of not less than 8 years, beginning on the date the military installation undergoes final closure and ending on the date the Administrator makes a final determination as to whether or not to imple-ment the applicable designation described in sub-paragraph (A) or (B) in accordance with the re-sults of the decennial census conducted after the area was initially designated as a base closure area; and

(II) if such area was treated as a HUBZone at any time after 2010, until such time as the Ad-ministrator makes a final determination as to whether or not to implement the applicable des-ignation described in subparagraph (A) or (B), after the 2020 decennial census.

(iii) DEFINITIONS.—In this subparagraph: (I) CENSUS TRACT.—The term ‘‘census tract’’

means a census tract delineated by the United States Bureau of the Census in the most recent decennial census that is not located in a non-metropolitan county and does not otherwise qual-ify as a qualified census tract.

(II) NONMETROPOLITAN COUNTY.—The term ‘‘nonmetropolitan county’’ means a county that was not located in a metropolitan statistical area (as defined in section 143(k)(2)(B) of the Internal Revenue Code of 1986) at the time of the most re-cent census taken for purposes of selecting quali-fied census tracts and does not otherwise qualify as a qualified nonmetropolitan county.

(E) QUALIFIED DISASTER AREA.— (i) IN GENERAL.—Subject to clause (ii), the term

‘‘qualified disaster area’’ means any census tract or nonmetropolitan county located in an area for which the President has declared a major disaster under sec-tion 401 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5170) or located


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in an area in which a catastrophic incident has oc-curred if such census tract or nonmetropolitan county ceased to be qualified under subparagraph (A) or (B), as applicable, during the period beginning 5 years be-fore the date on which the President declared the major disaster or the catastrophic incident occurred and ending 2 years after such date, except that such census tract or nonmetropolitan county may be a ‘‘qualified disaster area’’ only—

(I) in the case of a major disaster declared by the President, during the 5-year period beginning on the date on which the President declared the major disaster for the area in which the census tract or nonmetropolitan county, as applicable, is located; and

(II) in the case of a catastrophic incident, during the 10-year period beginning on the date on which the catastrophic incident occurred in the area in which the census tract or nonmetropolitan county, as applicable, is located.

(ii) LIMITATION.—A qualified disaster area described in clause (i) shall be treated as a HUBZone for a pe-riod of not less than 8 years, beginning on the date the Administrator makes a final determination as to whether or not to implement the designations de-scribed in subparagraphs (A) and (B) in accordance with the results of the decennial census conducted after the area was initially designated as a qualified disaster area.

(5) QUALIFIED HUBZONE SMALL BUSINESS CONCERN.— (A) IN GENERAL.—A HUBZone small business concern is

‘‘qualified’’, if— (i) the small business concern has certified in writ-

ing to the Administrator (or the Administrator other-wise determines, based on information submitted to the Administrator by the small business concern, or based on certification procedures, which shall be es-tablished by the Administration by regulation) that—

(I) it is a HUBZone small business concern— (aa) pursuant to subparagraph (A), (B), (C),

(D), (E), or (F) of paragraph (3), and that its principal office is located in a HUBZone and not fewer than 35 percent of its employees re-side in a HUBZone;

(bb) pursuant to subparagraph (A), (B), (C), (D), (E), or (F) of paragraph (3), that its prin-cipal office is located within a base closure area and that not fewer than 35 percent of its employees reside in such base closure area or in another HUBZone; or

(cc) pursuant to paragraph (3)(C), and not fewer than 35 percent of its employees en-gaged in performing a contract awarded to the small business concern on the basis of a pref-erence provided under section 31(b) reside


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within any Indian reservation governed by one or more of the tribal government owners, or reside within any HUBZone adjoining any such Indian reservation;

(II) the small business concern will attempt to maintain the applicable employment percentage under subclause (I) during the performance of any contract awarded to the small business concern on the basis of a preference provided under section 31(b); and

(III) with respect to any subcontract entered into by the small business concern pursuant to a contract awarded to the small business concern under section 31, the small business concern will ensure that the requirements of section 46 are satisfied; and

(ii) no certification made or information provided by the small business concern under clause (i) has been, in accordance with the procedures established under section 31(c)(1)—

(I) successfully challenged by an interested party; or

(II) otherwise determined by the Administrator to be materially false.

(B) LIST OF QUALIFIED SMALL BUSINESS CONCERNS.—The Administrator shall establish and maintain a list of quali-fied HUBZone small business concerns, which list shall, to the extent practicable—

(i) once the Administrator has made the certification required by subparagraph (A)(i) regarding a qualified HUBZone small business concern and has determined that subparagraph (A)(ii) does not apply to that con-cern, include the name, address, and type of business with respect to each such small business concern;

(ii) be updated by the Administrator not less than annually; and

(iii) be provided upon request to any Federal agency or other entity.

(6) NATIVE AMERICAN SMALL BUSINESS CONCERNS.— (A) ALASKA NATIVE CORPORATION.—The term ‘‘Alaska

Native Corporation’’ has the same meaning as the term ‘‘Native Corporation’’ in section 3 of the Alaska Native Claims Settlement Act (43 U.S.C. 1602).

(B) ALASKA NATIVE VILLAGE.—The term ‘‘Alaska Native Village’’ has the same meaning as the term ‘‘Native vil-lage’’ in section 3 of the Alaska Native Claims Settlement Act (43 U.S.C. 1602).

(C) INDIAN RESERVATION.—The term ‘‘Indian reserva-tion’’—

(i) has the same meaning as the term ‘‘Indian coun-try’’ in section 1151 of title 18, United States Code, ex-cept that such term does not include—

(I) any lands that are located within a State in which a tribe did not exercise governmental juris-diction on the date of the enactment of this para-


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graph, unless that tribe is recognized after that date of the enactment by either an Act of Con-gress or pursuant to regulations of the Secretary of the Interior for the administrative recognition that an Indian group exists as an Indian tribe (part 83 of title 25, Code of Federal Regulations); and

(II) lands taken into trust or acquired by an In-dian tribe after the date of the enactment of this paragraph if such lands are not located within the external boundaries of an Indian reservation or former reservation or are not contiguous to the lands held in trust or restricted status on that date of the enactment; and

(ii) in the State of Oklahoma, means lands that— (I) are within the jurisdictional areas of an

Oklahoma Indian tribe (as determined by the Sec-retary of the Interior); and

(II) are recognized by the Secretary of the Inte-rior as eligible for trust land status under part 151 of title 25, Code of Federal Regulations (as in effect on the date of the enactment of this para-graph).

(7) AGRICULTURAL COMMODITY.—The term ‘‘agricultural com-modity’’ has the same meaning as in section 102 of the Agricul-tural Trade Act of 1978 (7 U.S.C. 5602).

(q) DEFINITIONS RELATING TO VETERANS.—In this Act, the fol-lowing definitions apply:

(1) SERVICE-DISABLED VETERAN.—The term ‘‘service-disabled veteran’’ means a veteran with a disability that is service-con-nected (as defined in section 101(16) of title 38, United States Code).

(2) SMALL BUSINESS CONCERN OWNED AND CONTROLLED BY SERVICE-DISABLED VETERANS.—The term ‘‘small business con-cern owned and controlled by service-disabled veterans’’ means a small business concern—

(A) not less than 51 percent of which is owned by one or more service-disabled veterans or, in the case of any publicly owned business, not less than 51 percent of the stock of which is owned by one or more service-disabled veterans; and

(B) the management and daily business operations of which are controlled by one or more service-disabled vet-erans or, in the case of a veteran with permanent and se-vere disability, the spouse or permanent caregiver of such veteran.

(3) SMALL BUSINESS CONCERN OWNED AND CONTROLLED BY VETERANS.—The term ‘‘small business concern owned and con-trolled by veterans’’ means a small business concern—

(A) not less than 51 percent of which is owned by one or more veterans or, in the case of any publicly owned business, not less than 51 percent of the stock of which is owned by one or more veterans; and

(B) the management and daily business operations of which are controlled by one or more veterans.


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(4) VETERAN.—The term ‘‘veteran’’ has the meaning given the term in section 101(2) of title 38, United States Code.

(5) RELIEF FROM TIME LIMITATIONS.— (A) IN GENERAL.—Any time limitation on any qualifica-

tion, certification, or period of participation imposed under this Act on any program that is available to small business concerns shall be extended for a small business concern that—

(i) is owned and controlled by— (I) a veteran who was called or ordered to active

duty under a provision of law specified in section 101(a)(13)(B) of title 10, United States Code, on or after September 11, 2001; or

(II) a service-disabled veteran who became such a veteran due to an injury or illness incurred or aggravated in the active military, naval, or air service during a period of active duty pursuant to a call or order to active duty under a provision of law referred to in subclause (I) on or after Sep-tember 11, 2001; and

(ii) was subject to the time limitation during such period of active duty.

(B) DURATION.—Upon submission of proper documenta-tion to the Administrator, the extension of a time limita-tion under subparagraph (A) shall be equal to the period of time that such veteran who owned or controlled such a concern was on active duty as described in that subpara-graph.

(C) EXCEPTION FOR PROGRAMS SUBJECT TO FEDERAL CREDIT REFORM ACT OF 1990.—The provisions of subpara-graphs (A) and (B) shall not apply to any programs subject to the Federal Credit Reform Act of 1990 (2 U.S.C. 661 et seq.).

(r) DEFINITIONS RELATING TO SMALL BUSINESS LENDING COMPA-NIES.—As used in section 23 of this Act:

(1) SMALL BUSINESS LENDING COMPANY.—The term ‘‘small business lending company’’ means a business concern that is authorized by the Administrator to make loans pursuant to section 7(a) and whose lending activities are not subject to reg-ulation by any Federal or State regulatory agency.

(2) NON-FEDERALLY REGULATED LENDER.—The term ‘‘non- Federally regulated lender’’ means a business concern if—

(A) such concern is authorized by the Administrator to make loans under section 7;

(B) such concern is subject to regulation by a State; and (C) the lending activities of such concern are not regu-

lated by any Federal banking authority. (s) MAJOR DISASTER.—In this Act, the term ‘‘major disaster’’ has

the meaning given that term in section 102 of the Robert T. Staf-ford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5122).

(t) SMALL BUSINESS DEVELOPMENT CENTER.—In this Act, the term ‘‘small business development center’’ means a small business development center described in section 21.


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(u) REGION OF THE ADMINISTRATION.—In this Act, the term ‘‘re-gion of the Administration’’ means the geographic area served by a regional office of the Administration established under section 4(a).

(v) MULTIPLE AWARD CONTRACT.—In this Act, the term ‘‘multiple award contract’’ means—

(1) a multiple award task order contract or delivery order contract that is entered into under the authority of sections 303H through 303K of the Federal Property and Administra-tive Services Act of 1949 (41 U.S.C. 253h through 253k); and

(2) any other indefinite delivery, indefinite quantity contract that is entered into by the head of a Federal agency with 2 or more sources pursuant to the same solicitation.

(w) PRESUMPTION.— (1) IN GENERAL.—In every contract, subcontract, cooperative

agreement, cooperative research and development agreement, or grant which is set aside, reserved, or otherwise classified as intended for award to small business concerns, there shall be a presumption of loss to the United States based on the total amount expended on the contract, subcontract, cooperative agreement, cooperative research and development agreement, or grant whenever it is established that a business concern other than a small business concern willfully sought and re-ceived the award by misrepresentation.

(2) DEEMED CERTIFICATIONS.—The following actions shall be deemed affirmative, willful, and intentional certifications of small business size and status:

(A) Submission of a bid or proposal for a Federal grant, contract, subcontract, cooperative agreement, or coopera-tive research and development agreement reserved, set aside, or otherwise classified as intended for award to small business concerns.

(B) Submission of a bid or proposal for a Federal grant, contract, subcontract, cooperative agreement, or coopera-tive research and development agreement which in any way encourages a Federal agency to classify the bid or pro-posal, if awarded, as an award to a small business concern.

(C) Registration on any Federal electronic database for the purpose of being considered for award of a Federal grant, contract, subcontract, cooperative agreement, or co-operative research agreement, as a small business concern.

(3) CERTIFICATION BY SIGNATURE OF RESPONSIBLE OFFICIAL.— (A) IN GENERAL.—Each solicitation, bid, or application

for a Federal contract, subcontract, or grant shall contain a certification concerning the small business size and sta-tus of a business concern seeking the Federal contract, subcontract, or grant.

(B) CONTENT OF CERTIFICATIONS.—A certification that a business concern qualifies as a small business concern of the exact size and status claimed by the business concern for purposes of bidding on a Federal contract or sub-contract, or applying for a Federal grant, shall contain the signature of an authorized official on the same page on which the certification is contained.


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(4) REGULATIONS.—The Administrator shall promulgate reg-ulations to provide adequate protections to individuals and business concerns from liability under this subsection in cases of unintentional errors, technical malfunctions, and other simi-lar situations.

(x) ANNUAL CERTIFICATION.— (1) IN GENERAL.—Each business certified as a small business

concern under this Act shall annually certify its small business size and, if appropriate, its small business status, by means of a confirming entry on the Online Representations and Certifi-cations Application database of the Administration, or any suc-cessor thereto.

(2) REGULATIONS.—Not later than 1 year after the date of enactment of this subsection, the Administrator, in consulta-tion with the Inspector General and the Chief Counsel for Ad-vocacy of the Administration, shall promulgate regulations to ensure that—

(A) no business concern continues to be certified as a small business concern on the Online Representations and Certifications Application database of the Administration, or any successor thereto, without fulfilling the require-ments for annual certification under this subsection; and

(B) the requirements of this subsection are implemented in a manner presenting the least possible regulatory bur-den on small business concerns.

(y) POLICY ON PROSECUTIONS OF SMALL BUSINESS SIZE AND STA-TUS FRAUD.—Not later than 1 year after the date of enactment of this subsection, the Administrator, in consultation with the Attor-ney General, shall issue a Government-wide policy on prosecution of small business size and status fraud, which shall direct Federal agencies to appropriately publicize the policy.

(z) AQUACULTURE BUSINESS DISASTER ASSISTANCE.—Subject to section 18(a) and notwithstanding section 18(b)(1), the Adminis-trator may provide disaster assistance under section 7(b)(2) to aquaculture enterprises that are small businesses.

(aa) VENTURE CAPITAL OPERATING COMPANY.—In this Act, the term ‘‘venture capital operating company’’ means an entity de-scribed in clause (i), (v), or (vi) of section 121.103(b)(5) of title 13, Code of Federal Regulations (or any successor thereto).

(bb) HEDGE FUND.—In this Act, the term ‘‘hedge fund’’ has the meaning given that term in section 13(h)(2) of the Bank Holding Company Act of 1956 (12 U.S.C. 1851(h)(2)).

(cc) PRIVATE EQUITY FIRM.—In this Act, the term ‘‘private equity firm’’ has the meaning given the term ‘‘private equity fund’’ in sec-tion 13(h)(2) of the Bank Holding Company Act of 1956 (12 U.S.C. 1851(h)(2)).

(dd) DEFINITIONS PERTAINING TO SUBCONTRACTING.—In this Act: (1) SUBCONTRACT.—The term ‘‘subcontract’’ means a legally

binding agreement between a contractor that is already under contract to another party to perform work, and a third party, hereinafter referred to as the subcontractor, for the subcon-tractor to perform a part, or all, of the work that the contractor has undertaken.


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(2) FIRST TIER SUBCONTRACTOR.—The term ‘‘first tier subcon-tractor’’ means a subcontractor who has a subcontract directly with the prime contractor.

(3) AT ANY TIER.—The term ‘‘at any tier’’ means any subcon-tractor other than a subcontractor who is a first tier subcon-tractor.

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Documents

R E P O R T - Congress.gov...The SBA size standards are important because they establish eli-gibility for a variety of small business assistance programs, includ-ing a panoply of government